TOKYO, March 5, 2011 (Kyodo) -- Kajima Corp. has told three other Japanese construction companies that the four may incur losses totaling more than 80 billion yen in connection with their joint project to build a 1,200-kilometer expressway in Algeria, sources familiar with the matter said Friday. The huge loss appears likely due to swelling construction costs resulting from a delay in the work, the sources said. In September 2006, Kajima, Taisei Corp., Nishimatsu Construction Co. and Hazama Corp. jointly won a 540 billion yen order from the Algerian government to build the highway in the northern African country for completion in February 2010.

But the construction work is considerably behind schedule due to unfavorable geological conditions and a deterioration in the security situation in Algeria. Kajima, which leads the consortium, has been negotiating with the Algerian government to seek an increase in its spending on the project. But as the negotiations remain deadlocked, Kajima seems to have concluded it cannot avoid booking huge losses related to the project, the sources said. While Kajima and Taisei each have a stake of 37.5 percent in the joint venture, the ratios for Nishimatsu and Hazama are 15 percent and 5 percent, respectively. They will shoulder losses, if confirmed, in accordance with their stakes.

The four companies initially estimated their possible losses at 20 billion to 40 billion yen and began to write them off. But according to the latest report by Kajima, the losses are estimated to be much larger, angering the three other construction companies. "We rejected the amount of losses (proposed by Kajima) as unacceptable," an executive at one of the three companies said. In the first three quarters of fiscal 2010 to March 31, Kajima posted a group net profit of 31.9 billion yen on extraordinary profits from asset sales. But if losses related to the Algerian project are fixed at more than 80 billion yen, the three other contractors may fall into the red as a result of additional charges.